Research reveals devastating consequences of layoffs, recession

[scandal 951]

Research reveals devastating consequences of layoffs, recession

Greg Burns

March 25, 2010

For millions of Americans laid off in the devastating recession, the job search just isn't clicking.

And here's the really bad news: Almost no one will be able to recover the financial ground they've lost.

That's the inescapable conclusion from years of academic research into the last big recession, in the early 1980s, and job shocks thereafter.

The findings have trickled out in scholarly papers, gloomy facts buried in technocratic detail.

Perhaps knowing the truth will help frustrated job seekers recognize that their struggles are the norm.

"They should not take it personally," said Till von Wachter, a Columbia University economist who studies the dismal aftermath of recession.

Understanding the economic and social toll of sweeping job cuts also puts a spotlight on government policy — and American culture. In Europe, regulation slows the quick-on-the-trigger impulse to fire staff when the economy tanks. But the U.S. has made layoffs easier for employers, on the theory that flexible labor markets propel growth in the long run.

Exceptions exist, of course. Most everybody knows a fortunate soul whose career blossoms post-layoff. The majority, however, pay a butcher's bill, as reflected in the data:

•Involuntary layoffs result in lower lifetime earnings.

Using Social Security and other government records, von Wachter found that workers who lost stable jobs in 1982 suffered an average 30 percent drop in their incomes. Even 20 years later, earnings hadn't bounced back. And it's not as if those losing their jobs were only the less productive or refugees from failing industries, von Wachter said.

Income lost in a layoff mostly stays lost forever.

•Taking longer to hunt for a job doesn't translate into a higher paycheck.

Data from Germany, where different benefit levels encouraged some laid-off workers to remain unemployed longer than others, show that additional time for conducting searches and awaiting an economic rebound rarely yields a higher-paying job. Over time, pay is unrelated to the length of joblessness. Compared with their peers, those out of work for longer periods aren't particularly worse off when they finally re-enter the work force, von Wachter said.

Almost everybody makes less.

•Layoffs result in devastating health consequences.

High-seniority male workers were 50 percent to 100 percent more likely to die in the immediate aftermath of a layoff than colleagues who were spared the ax. Even 20 years later, those who were dismissed ran a greater risk of death, reducing life expectancy by 12 to 18 months. A separate study shows that for men, layoffs lead to higher blood pressure, and for women, depression, hostility and loneliness.

•Families suffer.

Job loss of a parent leads to higher dropout rates and lower test scores in their children. Even among wealthier families, where the economic impact of a layoff is cushioned, children underperform, noted Ariel Kalil, professor at the University of Chicago's Harris School of Public Policy Studies.

"It's not just about the money," she said.

•Landing a job after a layoff is only the start of rebuilding.

It can take as long as a decade for a dislocated worker to finally settle into stable employment. Changing jobs is common, and not necessarily for higher pay.

"Most people underestimate how long it will take to rebuild the career," von Wachter said. "It's not over after three or four years."

Despite the sobering conclusions, laid-off workers need not necessarily despair. Many opt for more satisfying work than the higher-paying jobs they held before, and some take the initiative to launch their own businesses, said Anne Edmunds, regional director of the Manpower Inc. staffing firm.

With the economy slowly improving, the unemployed are becoming a little more selective, choosing jobs that build on their personal strengths instead of merely jumping at any work that comes available.

Though it may not be obvious from the data, she said, "There is some good news out there."

[trillium13 84]

I hope there is some good news at some point.

I've been fortunate-I work in a field where the recession hasn't had too much impact, at least for us. I don't make a lot of money at all, but at least I have a paycheck.

My husband on the other hand, who has now had his GC for almost a year, can't even get anyone to acknowledge his applications, much less get an interview or an actual job. To say this has been disheartening would be an understatement. He's now going to school. We hope it will be helpful.

So for now we live on my measly check. It could be worse. It all freaking sucks though.

[Obama 2012 1,714]

I hope there is some good news at some point.

I've been fortunate-I work in a field where the recession hasn't had too much impact, at least for us. I don't make a lot of money at all, but at least I have a paycheck.

My husband on the other hand, who has now had his GC for almost a year, can't even get anyone to acknowledge his applications, much less get an interview or an actual job. To say this has been disheartening would be an understatement. He's now going to school. We hope it will be helpful.

So for now we live on my measly check. It could be worse. It all freaking sucks though.

You also live in Texas. It has its advantages economically 9 times out of 10.

[Mr. Big Dog 10,747]

In Europe, regulation slows the quick-on-the-trigger impulse to fire staff when the economy tanks. But the U.S. has made layoffs easier for employers, on the theory that flexible labor markets propel growth in the long run.

Try to get hired into a permanent position in Europe these days. The ill effect of regulations on lay-offs is that companies are often hesitant to add permanent staff and rather bring people in for "trial periods" which, last I heard, can be extended up to two years. You really gotta knock their socks off to be kept around after the trial period. Otherwise, they let you go and then you can start over with another employer in a trial period. If it wasn't for the huge barrier when it comes time to trim staff down, getting hired would be far easier. I believe that the US has it right on that front. After all, no employer kicks people out the door just to kick people out the door. On the contrary, employers typically work hard to retain their talent.

Edited March 26, 2010 by Mr. Big Dog

[scandal 951]

Data from Germany, where different benefit levels encouraged some laid-off workers to remain unemployed longer than others, show that additional time for conducting searches and awaiting an economic rebound rarely yields a higher-paying job. Over time, pay is unrelated to the length of joblessness. Compared with their peers, those out of work for longer periods aren't particularly worse off when they finally re-enter the work force, von Wachter said.

I wonder how well they normalized the studies in coming to these conclusions.

My intuition tells me that for a skilled professional in a so-so job market, it's worthwhile to be choosy. In a really horrible job market, sure, take the first thing that comes along. And in an excellent market the good offers will come to you almost effortlessly. But in a market such as we have today with some glimmers of hiring going on in select markets, the right approach is to get a good match and be patient waiting for it.

So, the conclusion that there is no value in taking longer on a job search seems to beg the questions: Are the job-seekers professional or unskilled? Experienced or relatively new entrants to the job market? Is the labor market they are competing in rebuilding, depressed, or hiring rapidly? I would think that without answers to those questions the result is meaningless.